How to identify short covering?

[Capricorn]

Here's a free COC calc.

http://www.khelostocks.com/calcCostOfCarry.html

 

[rahul_mail]

Your question is more towards deconding the market internals i.e. what is going on behind the scene shown on price chart.

IMO, the answer lies in monitoring the Open Interest number wrt to its previous value.
OI goes up when new contract is sold / bought..and the position is opened fresh.
As participants, close there position (cover their position), OI falls.

So if you see OI increasing with price going up, then it is new bullish positions are building up
when u see OI decreasing, and price going up, it is due to short covering of previously opened positions.

For more details/, example of this - please search other threads on Open Interest topic (I remember giving example of this in some thread, but can't pull out the link now)

As per my understanding, this info can't be seen on regular charts so easily. Because each trade adds to the daily volumn so every buy+sell trade will increase the number
whereas in OI calculation, the number is increased only when there is new contract position created else there is no change.
And any upmove in Price is upmove and it is reflected with ascending graph.

Happy trading.

Thanks for that info...

 

[rajatheroyal]

If (nifty)futures is in deep discount in relation to its underlying that indicates that there are lots of shorts in the system.So when dicount reduces ,you can assume that shorts are being covered.

 

[NOMINDTR]

THANK YOU VERY MUCH FOR YOUR CONCERN ON ME :clapping:
But in the discussion , what is cost of carry indicator?

Gotcha!

OK.

Cost of Carry is the difference between equity price and futures price. It is defined as follows.
Cost of Carry = interest to be paid to finance the underlying(equity) - income earned (eg. dividends from equity) + storage cost (only in case of commodities)

I have already confused people here
http://www.traderji.com/derivatives/25739-how-calculate-cost-carry-real-time.html

But this one you should go thru
http://en.wikipedia.org/wiki/Cost_of_carry

 

[mnandini28]

Gotcha!

OK.

Cost of Carry is the difference ......

I have already confused people here.

25.3.9

Thank U for taking the trouble of CONFUSING people. I was almost completely lost with the Wikipedia explanation. U hv made it so very simple.

Thanks again

ing Nandini

 

[sudoku1]

If (nifty)futures is in deep discount in relation to its underlying that indicates that there are lots of shorts in the system.So when dicount reduces ,you can assume that shorts are being covered.

in 2007- 08 right from 10k to 21k ,on 99 % ocassions....nifty was always in discount,can it b termed as short covering ?

 

[sgupta]

THANK YOU VERY MUCH FOR YOUR CONCERN ON ME :clapping:
But in the discussion , what is cost of carry indicator?

Hi,
Short covering and rally has been explained. Thanks.
But I have a small doubt i.e. at times one of these (price or OI) remain nearly constant and other gives significant move. In this condition how to intepret the market mood?